***Airline Tradeoff Disad



1NC Shell
Oil prices are dropping—airlines now have a slightly higher margin for profitability orbes! "#" [June 6 2012,
http://www.forbes.com/sites/afontevecchia/2012/06/06/airline-stocks-fl in!-hi!h-afterbi!-correction-in-oil-prices/ "#irline $tocks %l in! &i!h #fter 'i! (orrection )n *il +rices,,- .J Oil prices have s$ffered a s$bstantial correction over the last co$ple of months, with /$ benchmark 0.) even fallin! more than 201 in 2a . 0ith cru3e tra3in! in the mi3-ei!hties, fallin! prices shoul3 brin! some relief to consumers, particularl at the pump, but the also provi3e an investin! opportunit : airlines, which last ear consume3 461 of their revenues in 5et fuel. )t6s been a wil3 ri3e for cru3e tra3ers in 2011, with benchmark 0.) oil futures toppin! 7110 per barrel in %ebruar , an3 now tumblin! all the wa to 789.:4, as of 0e3nes3a 6s close. 0hile prices remain relativel hi!h, in part 3ue to un3erl in! !eopolitical concerns accor3in! to *+;(, the s$bstantial drop sho$ld prove b$llish for the economy and certain stoc%s& 'n partic$lar! airline stoc%s& A report b $<+ (apital )= release3 on 0e3nes3a su!!ests shares in airlines will contin$e to benefit as f$el prices retreat& )n 2011, the /.$. airline in3ustr consume3 16.: billion !allons of (et f$el, costin! them appro>imatel 7:? billion. )n3ee3, this is )"* of the ind$stry+s ,-11 reven$es! .leaving little room for profitability,, $<+6s Jim (orri3ore ar!ue3. /$t! as the tide has t$rned! so has the o$tloo% for airlines& Oil prices co$ld fall even f$rther, as ) e>plaine3 in a piece on the cru3e oil market, with 0.) possibl hittin! 7?9 b the en3 of the month. .he sustaine3 3ecline woul3 be !oo3 for the in3ustr "so lon! as the 3rop is not 3ue to such a severe economic 3ownturn that passen!ers stop fl in!.,

0igh Speed 1ail wo$ld trade off with the Airline 'nd$stry 2T1C -3+ @Joint .ransport Aesearch (enter, *ctober 2n3 an3 4r3 2008,
http://www.internationaltransportforum.or!/5trc/3iscussionpapers/B+200C0?.p3fD 2.$ Some policy4ma%ers in the 5S and especially in the 65 are concerned abo$t the s$stainability of prevailing inter$rban and interregional transport patterns& Aoa3 an3 air transport are perceive3 to !enerate e>cessive emissions of conventional pollutants an3 !reenhouse !ases, an3 the networks are e>cessivel con!este3 at some times an3 places. 7iven imperfections in road and air pricing to handle e8ternal costs! the provision of rail services is seen as a secon3Ebest polic to increase the net benefits from inter$rban and interregional transport& %or passen!er transport, high4speed rail is seen as s$fficiently attractive to change the modal split in these mar%ets& Be Aus @2008D Fuestions the !eneral social 3esirabilit of hi!hEspee3 rail, pointin! out that for a !eneric hi!hEspee3 rail connection the benefits are well below the costs, unless20 $ummar < (onclusions G Biscussion +aper 200C-? G H *;(B/).%, 200C rather favourable assumptions are ma3e on 3eman3 an3 costs. .he construction of new lines reFuires a hi!h volume of 3eman3, with enou!h economic value to compensate the hi!h cost involve3 in provi3in! capacit . )t is not onl that the number of passen!ers must be lar!e, but a hi!h willin!nessEtoEpa for the new facilit is reFuire3 as

. Legal and Political Perspectives.#.000 aircraft to over ?.J)*I#K . %irst. capital. 2.hreat Ae3uction at the /. . . the benefits are outwei!he3 b the costs @in particular the hi!h fi>e3 costsD.&.hese metho3s. i. 4 %i!ure 2 shows that A+2s !rew consi3erabl faster after 3ere!ulation than in the perio3 between 1C9: an3 1C?8.)L).(.+hil. 3 a3ic an3 national levels.B $. 'etween 1C9: an3 1C?8 /$ 3omestic A+2s !rew at an avera!e rate of ?90 million A+2s per ear. population !eo!raph .G Je3i3iah Ao al. +ollins @2008D a3vances 2o3elski an3 .am an3 John &ansman.(*I*2)( #IB $*()#K (*II.---& %i!ure : shows that the !rowth in capacit an3 traffic was achieve3 b a ma5or increase in the siNe of airline fleets& . 214-219D Kess intuitive is how periods of economic decline ma increase the li%elihood of e8ternal conflict.$.he number of aircraft use3 in commercial airline service increase3 from 2. *% #)A .e.conomic $i!nallin! an3 the +roblem of .nablin! .billion by .well.$. +ublishe3 b . Aeflectin! this increase in 3eman3.3ite3 b 'en Jol3smith an3 Jur!en 'rauer. an3 people& To e8amine the relationship between the economy and the air transportation system! a review of economic and social trends in the 5S since dereg$lation was cond$cted& )ncreases in air travel. $everal notable contributions follow.. %i!ure 4 shows that the domestic sched$led AS.s increased from )-.nvironmental benefits are minor 2? . A+2s !rew at avera!e rate of 1. Economics of War and Peace: Economic.conomic )nte!ration.meral3 Jroup +ublishin!.M )I .he %## has estimate3 that the 5S aviation ind$stry acco$nts for some 11&" million direct! indirect! and ind$ced (obs and over 9)1" billion dollars in earnings& 1. (an3i3ate at the /niversit of Iew $outh 0ales. Bepartment of Befense.$ 2ost anal ses on the economic impact of air transportation t picall onl a33ress the 3irect financial effects from aviation emplo ment an3 spen3in!. 2assachusetts )nstitute of . Birector of (ooperative .ffects of air transportation an3 how hi!h Fualit air connectivit affects access to markets.. . +olitical science literature has contribute3 a mo3erate 3e!ree of attention to the impact of economic 3ecline an3 the securit an3 3efence behaviour of inter3epen3ent states. )$'I 089?2:00:8.+ @A an . 7rowth in air travel 'n order to f$lly doc$ment the changes in the s$pply of air transportation! the growth in passenger traffic data! airline capacity and airline fleets were analy:ed& . 6conomic decline increases the ris% of war—strong statistical support& 1oyal 1.#. . while Aevenue +assen!er 2iles @A+2sD were use3 to measure traffic.000 aircraft between 1C?8 an3 1CC9. ma un3erestimate the true impact of air transportation b failin! to take into account the . i3eas.A#I$+*A. however. JB+ !rowth.billion in 1<=3 to over =-.conomic (rises. one nee3s man users who obtain hi!h benefits when switchin! mo3e or travellin! more. e>cept in cases where there is a hi!h 3ensit of 3eman3 an3 there are pressin! capacit problems in air an3 roa3 alternatives 28 .2 . an3 travel behavior were anal Ne3.)*I *I A.hompsonOs @1CC6D work on lea3ership c cle theor . )n fact. on the s stemic level.his su!!ests that careful evaluations of pro5ects are reFuire3 on a caseEb Ecase basis& The benefits from high4speed rail mainly ta%e the form of time savings compared to other modes! and possibly of congestion n relief in competing modes& . . p. 'etween 1C?8 an3 2000. 2010 @". /I). Airlines provide the %ey internal lin% to the economy Tam et al& -. )2+#(.echnolo! D2.8 billion A+2s per ear. Aesearch in this vein has been consi3ere3 at s stemic.he !rowth in 3omestic capacit was measure3 in terms of #vailable $eat 2iles @#$2sD.

others have consi3ere3 the link between economic 3ecline an3 e>ternal arme3 conflict at a national level. 'lomber! an3 &ess @2002D fin3 a stron! correlation between internal conflict an3 e>ternal conflict. increasing the ris% of miscalc$lation @%eaver. . )n summar . an3 . 2iller @1CCCD.fin3in! that rhythms in the global economy are associated with the rise and fall of a pre>eminent power and the often bloody transition from one pre-eminent lea3er to the ne8t. %urthermore. #s such. 2002.hacker @2006D fin3 supportin! evi3ence showin! that economic 3ecline an3 use of force are at least in3irectl correlate3. particularl 3urin! perio3s of economic 3ownturn. [en3 pa!e 21:. .hir3. me3ium an3 small powers. 2oreover. &ess. BeAouen @1CC9D. if the e8pectations of f$t$re trade decline. whereas political science scholarship lin%s economic decline with e8ternal conflict at systemic! dyadic and national levels. 200:D.to replace items such as ener! resources. $econ3.his implie3 connection between inte!ration. 1C81D that leads to $ncertainty about power balances. the view presente3 here shoul3 be consi3ere3 ancillar to those views. #lternativel .he lin%ages between internal and e8ternal conflict and prosperity are strong and m$t$ally reinforcing& 6conomic conflict tends to spawn internal conflict! which in t$rn ret$rns the favo$r. &owever. are statistically lin%ed to an increase in the $se of force. crises !enerall red$ce the pop$larity of a sittin! government. $eparatel . an3 thus weak +resi3ential popularit . even a relativel certain re3istribution of power coul3 lea3 to a permissive environment for conflict as a risin! power ma seek to challen!e a 3eclinin! power @0erner. (opelan3Os @1CC6. the li%elihood for conflict increases! as states will be inclined to $se force to gain access to those reso$rces& Crises co$ld potentiall be the trigger for decreased trade e8pectations either on its own or because it tri!!ers protectionist moves b inter3epen3ent states. althou!h he su!!ests that the causes an3 connections between !lobal economic con3itions an3 securit con3itions remain unknown. p. an3 Qisan!ani an3 +ickerin! @200CD su!!est that the ten3enc towar3s 3iversionar tactics are !reater for 3emocratic states than autocratic states. crises an3 arme3 conflict has not feature3 prominentl in the economic-securit 3ebate an3 3eserves more attention. on a 3 a3ic level. BeAouen @2000D has provi3e3 evi3ence showin! that periods of wea% economic performance in the 5nite3 States. &e ar!ues that inter3epen3ent states are likel to !ain pacific benefits from tra3e so lon! as the have an optimistic view of future tra3e relations. e>o!enous shocks such as economic crises coul3 $sher in a redistrib$tion of relative power @see also Jilpin. "Biversionar theor P su!!ests that. @'lomber! < &ess. 1CCCD. 2000D theor of tra3e e>pectations su!!ests that Ofuture e>pectation of tra3eO is a si!nificant variable in un3erstan3in! economic con3itions an3 securit behaviour of states. when facing $npop$larity arising from economic decline! sittin! governments have increased incentives to fabricate e8ternal military conflicts to create a ?rally aro$nd the flag? effect. 3ue to the fact that 3emocratic lea3ers are !enerall more susceptible to bein! remove3 from office 3ue to lack of 3omestic support. 1CC9D.he write. particularl for 3ifficult [en3 pa!e 214. Jelpi @1CC?D. an3 'lomber!.Those st$dies ten3 to focus on 3 a3ic inter3epen3ence instea3 of !lobal inter3epen3ence an3 do not specifically consider the occurrence of an3 con3itions create3 b economic crises. recent economic scholarship positivel correlates economic inte!ration with an increase in the freFuenc of economic crises.: .9 . #s such. &ess. 8CD 6conomic decline has also been lin%ed with an increase in the likelihoo3 of terrorism @'lomber!. +ollins @1CC6D also shows that !lobal economic c cles combine3 with parallel lea3ership c cles impact the likelihoo3 of conflict amon! ma5or. the presence of a recession tends to amplify the e8tent to which international and e8ternal conflicts self>reinforce each other. This observation is not contradictory to other perspectives that lin% economic interdependence with a decrease in the likelihoo3 of e>ternal conflict. which has the capacity to spill across borders and lead to e8ternal tensions. such as those mentione3 in the first para!raph of this chapter. . 0an! @1CC6D. < 0eerapana.

NC 5ni@$eness Oil prices are dropping—airlines now have a slightly higher margin for profitability orbes! "#" [June 6 2012. the s$bstantial drop sho$ld prove b$llish for the economy and certain stoc%s& 'n partic$lar! airline stoc%s& A report b $<+ (apital )= release3 on 0e3nes3a su!!ests shares in airlines will contin$e to benefit as f$el prices retreat& )n 2011. but the also provi3e an investin! opportunit : airlines. )t6s been a wil3 ri3e for cru3e tra3ers in 2011.: billion !allons of (et f$el. costin! them appro>imatel 7:? billion.$.(. 0ith cru3e tra3in! in the mi3-ei!hties. . which last ear consume3 461 of their revenues in 5et fuel.) oil futures toppin! 7110 per barrel in %ebruar ..com/sites/afontevecchia/2012/06/06/airline-stocks-fl in!-hi!h-afterbi!-correction-in-oil-prices/ "#irline $tocks %l in! &i!h #fter 'i! (orrection )n *il +rices. )n3ee3. an3 now tumblin! all the wa to 789. with 0. fallin! prices shoul3 brin! some relief to consumers. 0hile prices remain relativel hi!h.leaving little room for profitability.) possibl hittin! 7?9 b the en3 of the month. $<+6s Jim (orri3ore ar!ue3.. in part 3ue to un3erl in! !eopolitical concerns accor3in! to *+. as of 0e3nes3a 6s close. . particularl at the pump. with benchmark 0.. /$t! as the tide has t$rned! so has the o$tloo% for airlines& Oil prices co$ld fall even f$rther.J Oil prices have s$ffered a s$bstantial correction over the last co$ple of months. with /$ benchmark 0.) even fallin! more than 201 in 2a .he sustaine3 3ecline woul3 be !oo3 for the in3ustr "so lon! as the 3rop is not 3ue to such a severe economic 3ownturn that passen!ers stop fl in!. the /. as ) e>plaine3 in a piece on the cru3e oil market. http://www..:4.-11 reven$es! . airline in3ustr consume3 16.forbes. this is )"* of the ind$stry+s ...

.NC Ain%s .

he price of a 'ei5in!-$han!hai hi!h-spee3 train ticket has not been announce3 et. 2ore 3ecisive than their spee3 probabl was their faresG5ust 180 uan @72?D each wa & The two airlines had been str$ggling to s$rvive against the intro3uctor fast rail service of three trains a 3a that be!an in 200C& . China So$thern #irlines $sed to charge a reporte3 =-.here will be some impact for sure. wo$ld be Cvery m$ch impactedP if hi!h-spee3 trains start operatin! the same route.J Bhile high>speed trains may be pop$lar with passengers.y$an to fl between Juan!Nhou an3 (han!sha.le>isne>is. This month! passengers co$ld b$y tic%ets online from the carrier for as little as 1=. . an3 it is better to give $p immediately! the carriers tell (hinese me3ia& As the railwa s ministr commissions the world+s largest high>speed rail system! the airline ind$stry is watching for si!ns from earl routes of how severe the damage will be& # ear a!o.he rollin! stock ma not be as fast as an aircraft.rains Brive (hinese #irlines *ff #nother Aoute. when 490 kph trains be!an runnin! between the two cities.$ %ast trains have claime3 another aviation victim in (hina. Met the (ivil . 2r $an!iambut believes China?s airlines will be p$t f$rther on the bac% foot by new train ro$tes& lights of less than two ho$rs. PThey will come $nder press$re when these hi!h-spee3 networks become more full operational.[Baniel. "%ull .thenational. he sa s. (hina $outhern was 3riven off the ::0 km route between Rhen!Nhou an3 Si6an b 490 kph trains. http://www. 'n 6$rope! airlines have dropped some ro$tes between ma(or cities altogether as a res$lt of competition from high>speed railways. even for business travellers. 20116 %ast .y$an.P .he two cities are :90 km @280 mi.ae/business/full-throttle-on-hi!h-spee3-rail.he e>perience with the 290 kph trains between 0uhan an3 Ian5in! su!!ests that the fastest rail services can eliminate all airline competition on a (hinese route of more than :90 km.com/hottopics/lnaca3emic/D 2. P) 3onOt think the will be close3 entirel . 2arch 20th http://www. but 2r $an!iambut sa s the ministr of railways will ens$re it is Crather competitiveC with flying.P he sa s.. .D apart. he thinks the 'ei5in!-to-$han!hai air ro$te will s$ffer when the hi!h-spee3 rail line opens an3 cuts the rail trip from 10 hours to four hours.hrottle on &i!h $pee3 Aail. 2arch 20 2010. with (hina $outhern an3 &enan #irlines !ivin! up the 0uhan-Ian5in! route& *minousl for aviation! the carriers decided they were $nable to compete over that stage length against trains that by Chinese standards are only moderately fast! with ma>imum spee3s of 290 kph @160 mphD.. but freFuenc coul3 be re3uce3. they can ca$se t$rb$lence to the airline ind$stry. (hina $outhern lost half of its business on the 8:0 km route between 0uhan an3 Juan!Nhou last ear. which lies on the line to 0uhan. P.-1.P he sa s.7eneric Ain%s 0S1 directly trades off and competes with airlines /ardsley! oreign Correspondent for The National! . #pril 1st. .he prospect of increase3 freFuencies in the thir3 Fuarter makes the route untenable. #s a result.housan3s of kilometers of new lines will be opene3 this ear. . an3 the trains take three hours for the trip. but as the trains r$n directly into city centres they can be more attractive than flying. Trains trade off D Chinese airline ind$stry proves Aviation Daily 11+ @'ra3le +errett. No wonder then that airlines have c$t prices to stay competitive.

an3 have create3 new opportunities for hi!h-spee3 rail transport. Joo3 e>amples are cit pairs such as +aris-K on. . compare3 to the airplane& The 0ST has a clear advantage over the airplane on city pairs with travel times between two and three ho$rs.. +assen!ers will be transferre3 from the airplane to the trains at the airline hub with their ticket booke3 b the airline compan . #ccor3in! to the literature. freFuenc of the service. . *n the route 2a3ri3-'arcelona. . 2a3ri3-$eville an3 Aome-'olo!na.3inbur!hD. Kon3on. . *ther factors that contribute to the relative position of rail to air are ticket prices. &owever. http://www. . 'n general! the tic%et price for high>speed rail travel is lower than for air travel! and this difference is reflected in the mar%et share.hal s hi!h-spee3 train on the #mster3am-+aris @: hoursD route.hal s trains on the #mster3am-+aris route. The train can achieve mar%et shares of between E. *n certain cit pairs @i. the avera!e travel time an3 travel costs from the cit to the airport are relativel low. har3l an research is available about the impact of low-cost carriers on the substitution rate.percent. low-cost carriers even offer tickets below the price of a train ticket. which is in favor of the &$. in the 3evelope3 eastern re!ion of (hina.aerlines.mbraer 1C0 operator affiliate3 with #ir (hina.e. 'arron @200?D reports market shares ran!in! from 10 percent to C? percent for &$.rain for #ir . new 5ourne sD. /nfortunatel . reliabilit an3 punctualit of the services an3 !overnment polic .and <. travel time is the most important one. the hi!hspee3 train has a si!nificant market share on the +aris-Kon3on ... %actors )nfluencin! $ubstitution . the rise of low cost air carriers has put pressure on overall ticket prices in the air market. with more than 6 million people.ransport.nl/issueT:4/:4TJorritsmaT#iAailT$ubstitution.e. 1ail o$t competes—f$el prices! travel times! and realiability& 2orritsma! writer for Aerlines! <[+eter.he .#viation #3ministration of (hina is pre3ictin! 141 annual traffic !rowth for the airlines in the comin! five ears. #irline companies have also taken a slice of the pie of hi!h spee3 transport. "$ubstitution *pportunities of &i!h $pee3 . airline alliances.&ambur!D to 14 per cent @(olo!ne2unichD. QK2 /#ir %rance participate to!ether with Butch Aailwa s in the &i!h $pee3 #lliance @&$#D which operates the . *n the other han3.ravel time an3 travel costs to an3 from the airport terminal to the cit center or 3owntown area 3etermine the accessibilit of the airport. nor is it clear if the !rowth can be attribute3 to a !eneration effect @i. is another hub. barel less than the rates of abo$t 1E* $s$ally seen last decade& &enan #irlines is an . compare3 to the same perio3 in 200?. which is not et in full operation.isenkopf @2006D estimates a substitution rate from rail to air ran!in! from 9 per cent @(olo!ne.urostar recentl announce3 it e>perience3 a 20 per cent !rowth in passen!ers over the last si> months. accessibilit of railwa stations an3 airport terminals. alrea3 has a market share of appro>imatel :9 percent compare3 to the airplane. issue :4.hat is one of the reasons for the hi!h market share of the airplane on that route. . the inte!ration of networks.D and airplanes is becoming a hot iss$e a!ain nowa3a s. .p3f. Aapi3l 3evelopin! 0uhan.urostar 3i3 not mention whether passen!ers substitute3 from the airplane or car. &i!h f$el prices an3 the intro3uction of a socalle3 ecolo!ical surchar!e in the Ietherlan3s on airplane tickets have p$t press$re on airline companies.any factors infl$ence the mar%et shares between the airplane and high>speed trains. Ian5in!. is a hub of the fast-rail s stem. with a population of 10 million.his has been 3ue to improve3 travel times between 'russels an3 Kon3on an3 between +aris an3 Kon3on. inclu3in! surroun3in! 3istricts.J )ntro3uction Competition between high>speed trains @&$.

the punctualit of the . %or e>ample.urostar @the share of trains with. a 19 minutes 3eviation from the timetableD has increase3 from ?C per cent since it starte3 operations to 8C per cent to3a . . +oor accessibilit of both airports b train an3 roa3 is probabl a factor that has a certain influence @$teer Bavies Jleave. 'mproved p$nct$ality ma%es it also attractive for b$siness travelers to plan their ret$rn (o$rney over longer distances on the same day& . 3espite its hi!h ticket price.urostar claims that punctualit is as important as improvin! travel time. The operators of high>speed rail services find reliability and p$nct$ality important factors that contrib$te to higher mar%et shares. 2006D. at the most.route.

http://www.-. 260 A2' an3 400 A2' respectivel .26 A2'. Chinese airlines have been $nable to compete with (A& on the short-/me3ium-haul routes even with cost>based pricing. #nmin! Rhan!. http://www. . This poses a serio$s challenge to (hinese airlines as their costs have been increasin!.ven with a loa3 factor of 891. (hina ..he current fare of :C0 A2' onl covers variable costs an3 a proportion of fi>e3 costs.:8 A2'. whereas the fli!ht operation cost e>clu3in! 3epreciation. interests cost an3 3epreciation per seat amounte3 to 200 A2'. . since (hinese airlines 3erive most of their revenue from 3omestic markets while finance ma5orit of their fleets purchase with 3ebt in /$ 3ollars. Rhen! Kei.-. for service over a 3istance of 1000 km this translates to a total cost of 969 A2' or mar!inal/operational cost of 406 A2'.astern an3 (hina $outhern. airport an3 #.( costs per (#$Q is 0. Burin! 2009e2010 (hinese A2' appreciate3 b more than 201 a!ainst the /$ 3ollar. if Chinese airlines have to rely more on international b$siness d$e to increased competition in domestic mar%et! appreciation of A2' will wor% against them& Once 0S1 has been invested in! airlines won+t be able to compete $! ac$lty of /$siness at 0ong Gong Folytechnic 5niversity! Hhang! from the Sa$der School of /$siness at the 5niversity of /ritish Col$mbia and Aei! from the Department of Air Transport at Cranfield 5niversity! 11 [Siaowen %u.China Froves Ain%s China proves—airlines cannot compete with 0S1 $! ac$lty of /$siness at 0ong Gong Folytechnic 5niversity! Hhang! from the Sa$der School of /$siness at the 5niversity of /ritish Col$mbia and Aei! from the Department of Air Transport at Cranfield 5niversity! 11 [Siaowen %u. . while non-A2' base3 3ebt account for ?0e8?1 of their total 3ebts. &owever. maintenance. once the 0S1 infrastr$ct$re has already been invested! mar%et o$tcome will be determined largely by marginal costs.19 &owever the &$A is barel a winner.able :. which si!nificantl re3uce3 (hinese carriers6 cost lea3ership in the international market as evi3ence3 in . #nmin! Rhan!. 'ase3 on the estimation in the previous section. .J )t shoul3 be note3 that there is little room for airlines to lower prices f$rther! as c$rrent fares are already close to cost& .science3irect. Becember 16 2011.J )n summar . Rhen! Kei. Jol3man $achs @2010aD estimate3 that for the "bi! three. . their A2' base3 sales account for ?0e801 of their revenues. Becember 16 2011.science3irect.he (ost per #vailable $eat Qilometer @(#$QD of (hina $outhern in the first half of 2010 is about 0.com/science/article/pii/$0?4C889C1100062S "0ill (hina6s airline in3ustr survive the entr of hi!h-spee3 railU. $uch a currenc appreciation has been a blessin! overall. &owever. carriers.com/science/article/pii/$0?4C889C1100062S "0ill (hina6s airline in3ustr survive the entr of hi!h-spee3 railU.. the operational cost. namel #ir (hina.

com/science/article/pii/$0?4C889C1100062S "0ill (hina6s airline in3ustr survive the entr of hi!h-spee3 railU. )n3ee3.& 0S1 ris%s overplayed 0S1 has cost and time advantages over airlines on short>ha$l (o$rneys& 0e ar!ue that (o$rneys $nder 1--. &$A was intro3uce3 to $pain in 1CC2 with the openin! of the :?2 km . Becember 16 2011.J #irlines 3eraile3U As China+s hi!h spee3 rail I0S1J networ% rolls o$t! airlines are $nder press$re to prevent passenger migration& $ome 0S1 ro$tes c$rrently in operation have had airlines abort operations on them! c$t capacity! or slash fares& The concerns over the airline ind$stry+s f$t$re are intensifying as the 'ei5in!$han!hai route approaches its inau!uration in June this ear.D . http://www. #nmin! Rhan!. we ar!ue that 0S1 ris%s will be very limited for two reasons& irst! 0S1 wo$ld be time disadvantaged over these distances& Second! the high proportion of b$siness traffic Iwith low price>time elasticityJ on the ro$tes that matter most to airlines Iin terms of capacity! reven$e and profitsJ wo$ld mean low migration& 0S1 will wrec% the airline ind$stry $! ac$lty of /$siness at 0ong Gong Folytechnic 5niversity! Hhang! from the Sa$der School of /$siness at the 5niversity of /ritish Col$mbia and Aei! from the Department of Air Transport at Cranfield 5niversity! 11 [Siaowen %u.research. Rhen! Kei.* in 1CC4& )n the AondoneFaris ro$te. 2a 11.. not all the airline routes in this market are at risk as a lar!e portion of such airline routes is in 0est (hina W a re!ion with no &$A. (ompetitive effect of &$A on airlines Sharp competition between 0S1 and airlines has been witnessed in mar%ets aro$nd the world! partic$larly in short to medi$m ro$tes linkin! metropolitan cities.+B% "(hinese #irlines: &i!h $pee3 Aail Aisks *verpla e3. capt$red abo$t 3-* of the point>to>point . Bith c$rrent cost str$ct$re! airlines can barely compete on this ro$te for point>to>point travelers& 0S1 will o$t>compete airlines D China proves& Bebb ! analyst for the 0ong Gong and Shanghai /an%ing Corporation Aimited! and Ghetan! associate from /angalore! 11 @2ark an3 Aa5ani..J 4. Over longer distances! however.-1.'esi3es.com/mi3as/Aes/ABLU pVp3f<ke Vnw=QbKb#!+<nV2C?6?2. while it is relatively easy for airlines to re>deploy their fleets. . . since intro3uce3 in 1CC:.science3irect. rail operator faces great e8it barrier and th$s wo$ld contin$e to compete aggressively so long as price is larger than marginal cost.-. The rail share of the whole air X rail market increased from .%ilometers will be dominated by 0S1 beca$se the speed advantage of airlines over these distances disappears as airport access! chec%>in! chec%>o$t and travel time from the airport to city centre are ta%en into consideration& &owever. we estimate that the routes actuall at risk in this cate!or forme3 less than 21 of the total 3omestic capacit of the three +A( airlines in 2010.11 in 1CC1 to 3.adride$evilla line. followed by another three %ey ro$tes to be opened in .uro$tar has. http://www.hsbc.

which was mostly attrib$table to the increased availability of 0S1 connections. . 0S1 will price o$t airlines $! ac$lty of /$siness at 0ong Gong Folytechnic 5niversity! Hhang! from the Sa$der School of /$siness at the 5niversity of /ritish Col$mbia and Aei! fromthe Department of Air Transport at Cranfield 5niversity! 11 [Siaowen %u.science3irect. linkin! .he (ost per #vailable $eat Qilometer @(#$QD of (hina $outhern in the first half of 2010 is about 0. .--=.9 km..and . 'n less than three years! T0S1 has eliminated intra> Taiwan air travel services. . the operational cost.he current fare of :C0 A2' onl covers variable costs an3 a proportion of fi>e3 costs.&$AD started operation in 2an$ary .aipei an3 Qaohsiun! alon! the west coast with a total 3istance of 449. Becember 16 2011.--K has significantly red$ced air traffic between the two cities. #nmin! Rhan!.--=. once the 0S1 infrastr$ct$re has already been invested! mar%et o$tcome will be determined largely by marginal costs& 'esi3es.26 A2'. http://www.--.com/science/article/pii/$0?4C889C1100062S "0ill (hina6s airline in3ustr survive the entr of hi!h-spee3 railU. the openin! of 0S1 between Seo$l and /$san in . as current fares are alrea3 close to cost.( costs per (#$Q is 0. for service over a 3istance of 1000 km this translates to a total cost of 969 A2' or mar!inal/operational cost of 406 A2'. while it is relatively easy for airlines to re>deploy their fleets! rail operator faces great e8it barrier and th$s wo$ld contin$e to compete aggressively so long as price is larger than marginal cost& Bith c$rrent cost str$ct$re! airlines can barely compete on this route for point-to-point travelers .ransport %orum @200CD reporte3 that domestic air traffic in rance declined by =* between .he )nternational .:8 A2'. Rhen! Kei. interests cost an3 3epreciation per seat amounte3 to 200 A2'.ven with a loa3 factor of 891. 'ase3 on the estimation in the previous section. maintenance. whereas the fli!ht operation cost e>clu3in! 3epreciation.19 &owever the &$A is barel a winner. .-. 260 A2' an3 400 A2' respectivel . .J )t shoul3 be note3 that there is little room for airlines to lower prices further. )n $outh Qorea. 2006J& The Taiwan 0igh Speed 1ail @. &owever.traffic @$teer Bavies Jleave. airport an3 #.

--< [Ban.com/article/$'10001:2:092?02404C1820:9??::80448??:1??26.J ) was rea3in! 2arshall Jackson6s blo! this weeken3 an3 notice3 he ha3 mentione3 that +resi3ent Obama has revealed his initial plans for high speed rail in this co$ntry& ' as%ed myself if an e8pansion co$ld h$rt the airlines& Short answerL absol$tely& One notable e8ample is the .3it: #ccor3in! to this 0all $treet Journal article.he air carriers are motivated by profits and losses @as the shoul3D.J 0igher f$el costs and a treachero$s economic environment are weighing on global airlines! inclu3in! =antas an3 .. #pril 21 200C.eanwhile! a government>f$nded train system with g$aranteed f$nding can contin$e operating despite being $nprofitable! ma%ing tr$e competition diffic$lt& 0igh f$el prices and economic trends cr$shing the airline ind$stry now Ball Street 2o$rnal! 2$ne E [ Jlobal #irlines %l )nto O$tormO http://online. an3 the opposite happens on successful routes. take a look at this part in the notes to )beria6s %ebruar traffic results: #ccor3in! to the new $trate!ic +lan.61. the airline will a35ust accor3in!l b either eliminatin! the route or trimmin! capacit . Any f$rther improvement in the Northeast Corridor co$ld negatively affect the Delta and 5S Airways sh$ttle operations! an3 ) a!ree with 2arshall that So$thwest wo$ld get h$rt @) think the intra-.adrid D /arcelona ro$te. at /$7:. Kast month.e>as an3 intra-(alifornia routes especiall D. the compan re3uce3 capacit in the 3omestic sector b 21.Spain Froves Ain%s 0S1 wo$ld be a disaster for the airlines ind$stry D Spain proves Bebb! aviation reporter! . http://boar3in!area. 'f this is ends $p being an e8pansion of Amtra%! '+m very worried when it comes to competition with the airline ind$stry. 'n ebr$ary last ear! a high speed rail line was opened between the two cities. @&at tip to m 3a3 for the link.ws5. ..91 in this sector. sai3 it was consi3erin! whether to accelerate the retirement of a!in! aircraft after it warne3 of P3isappointin!P .mirates #irline.D $ome airlines here in the States co$ld definitely be h$rt by a high speed rail e8pansion.com/blo!s/thin!sinthesk /200C/0:/21/shoul3-airlines-fear-hi!hspee3-rail/ "$houl3 #irlines %eear &i!h $pee3 AailU. accor3in! to the #ssociation of #sia +acific #irlines. similar to the level reache3 in %ebruar 2008.html.. )f a route isn6t performin! well. #vera!e sta!e len!th !rew b 6. . the high speed trains have M snatched half the ro$te+s air>passenger traffic&. lea3in! to a loa3 factor of 68. 0hile ) 3on6t have the e>act 3ecrease in freFuencies. 3ue to the hi!her re3uction of capacit in fli!hts between 'arcelona W 2a3ri3 @this route be!an to be operate3 b the hi!h spee3 train on the 20th of %ebruar 2008D. which has historicall been the worl36s busiest. .?1. (atha +acific #irwa s Kt3. #siaOs carriers last ear earne3 :?1 less in net profit than in 2010.8 billion. .

an3 Qorean #irlines recentl poste3 Fuarterl losses.C61 stake.2 million #ustralian 3ollars @/$7881.a barrel! from abo$t 5S91--! to revive margins& .ues3a it has bou!ht a nearl :1 stake in =antas rival Lir!in #ustralia Kt3.hat !ives an implie3 valuation of #749. (lark of . Kast month. (lark a33e3 .#/ 0. 6ven fast>growing .$. centsD each 2on3a .mirates sai3 its latest fiscal.tiha3 #irwa s of #bu Bhabi sai3 . presi3ent of Bubaibase3 .first-half financial results. sai3 in an interview. $in!apore #irlines Kt3. forcin! both to rethink sche3ules an3 a35ust aircraft 3eplo ment to boost profits. # spokesman for .ear net profit fell ?21 after the compan took a /$71. .mirates #irline. the poun3 is !oin! south.ues3a that the price of /rent cr$de oil will need to drop to between 5S93. leavin! the compan with a market capitaliNation of C06. fuel costs are still too hi!h. .tiha3Os 4.001 $hares in Lir!in #ustralia close3 at :1 #ustralian cents @:0 /.C million on . 2r.he euro is !oin! south.im (lark. thou!h. L#&.9 millionD. 2r.tiha3 operates 2: fli!hts a week between #bu Bhabi in the +ersian Julf an3 #ustralia.P #mi3 those challen!es. .mirates cautione3 that many global carriers co$ld be forced to retrench.6 billion hit from hi!h fuel costs.iddle 6ast airlines! once perceived to be imm$ne from global trends! have started to voice concern abo$t b$siness conditions& P't?s a perfect storm of adversity now facing airlines!C . .tiha3 sai3 it woul3 like to raise its hol3in! to at least 101.and 5S9<. P.

his imbalance is e>pecte3 to become even more severe over the ne>t five ears as the final members of the #pollo-era !eneration of en!ineers an3 scientists complete :0. )n fact.J Aerospace systems are of considerable importance to 5&S& national sec$rity! economic prosperity! technological vitality! and global leadership& Aerona$tical and space systems protect o$r citi:ens! armed forces! and allies abroad& They connect the farthest corners of the world with safe and efficient air transportation and satellite comm$nications.000 en!ineers an3 scientists -.?9 percent of our countr Os !ross national pro3uct. e>plore the solar s stem.technolo! emplo ment.NC 'nternal Ain%s Strong aerospace %ey to overall 5S 0egemony—even a moderate decline in the ind$stry wo$ld be disastro$s Thompson < @Bavi3.he #erospace 0orkforce. brin!in! the total to over ??9.$. to3a . #erospace research an3 3evelopment an3 manufacturin! companies !enerate3 appro>imatel 72:0 billion in sales in 2008.uropean an3 #sian countries. onl about 19 percent of /.000 emplo ees to the sectorOs workforce. #)##Os view on this is as follows. unless effective action is taken to reverse current tren3s.$. an3 stu3 the wi3er universe. . aerospace sector also contributes in ma5or wa s to #mericaOs economic output an3 hi!h. the /. the /. ". . e>perience3 professionals are retirin! from or otherwise leavin! our in3ustrial an3 !overnmental aerospace workforce than earl career professionals are enterin! it. its influence on attractin! an3 motivatin! tomorrowOs aerospace professionals is much !reater than its imme3iate emplo ment contribution. even as the 3eman3 for their knowle3!e an3 skills in aerospace an3 other in3ustries keeps increasin!.ear histor . )n part. . stu3ents earn their first colle!e 3e!ree in en!ineerin! or science.$. +resi3ent W #merican )nstitute of #eronautics an3 #stronautics.he currentl emplo about 690. )nclu3e3 in this number are more than 200. . 12-10.000 people. Mour secon3 Fuestion concerns the implications of a cutback in human spacefli!ht pro!rams.arth.arth. our in3ustr Os abilit to hire the best an3 bri!htest !ra3uates from overseas is also severel constraine3.000 people throu!hout our countr .$. &owever. Ke>isD . human spacefli!ht pro!rams 3irectl emplo somewhat less than 10 percent of our countr Os aerospace workers.he /.. man more ol3er. well behin3 the :0 or 90 percent levels seen in man . %e3eral Iews $ervice.o3a . citiNens. or nearl 1. aerospace sector is e>pecte3 to e>perience a 3ramatic 3ecrease in its technical workforce over the ne>t 3eca3e. 2eanwhile.$. $impl put. #s a result.ear careers an3 transition to well-3eserve3 retirements. !overnment a!encies an3 3epartments en!a!e3 in aerospace research an3 operations a33 another 129.one of the lar!est concentrations of technical brainpower on . /. an3 the monitor the .$.or :9. 0hile /. aerospace workforce is now facin! the most serious 3emo!raphic challen!e in his 100.$. the suppl of oun!er aerospace en!ineers an3 scientists enterin! the in3ustr is woefull insufficient to replace the mountin! wave of retirements an3 other 3epartures that we see in the near future. this is the result of broa3er technical career tren3s as en!ineerin! an3 science !ra3uates from our countr Os universities continue a multi-3eca3e 3ecline. %or nearl 90 ears the e>citement an3 challen!e of human spacefli!ht have been tremen3ousl important factors in the 3ecisions of !enerations of oun! people to . aroun3 90 percent of the current aerospace workforce will be eli!ible for retirement within 5ust the ne>t five ears. Bue to the 3ual-use nature of aerospace technolo! an3 the limite3 suppl of visas available to hi!hl -Fualifie3 non-/..

establishe3 !reat powers to maintainin! it. http://www.J Aerospace is 1D critical to military dominance and 2D important to overall technological development& Bith bo$ndless potential for scientific advance! it promises tremendo$s military! economic! and political rewards& #erospace offers establishe3 powers unprece3ente3 opportunities to enhance their !eopolitical e3!e. Bue to low annual pro3uction rates an3 hi!hl -specialiNe3 pro3uct reFuirements. #ccor3in!l . 200:. 5S aerospace ind$stry %ey to revitali:e the economy> creates (obs and f$els trade Tr$po! 'nternational Trade Administrator from the Department of Commerce! 11! .ast-0est )nstitute. . human space pro!rams woul3 be substantiall 3etrimental to the future of the aerospace workforce.herefore. 'e on3 the previousl note3 critical influence on the future suppl of aerospace professionals. #)## offers the followin! su!!estions in this re!ar3. the domestic s$pply chain for space systems is relatively fragile& . a ma(or c$tbac% in human space spen3in! co$ld have large and highly adverse ripple effects thro$gho$t commercial! defense. which foun3 that :0 percent of current aerospace en!ineerin! un3er!ra3uates cite3 human space pro!rams as the main reason the chose this fiel3 of stu3 .Space operations and activities $tili:ing space>based assets have broad implications for national power in peace and warN military operations in space are e8tensively interrelated with national and political interests! and any action in space! even minor ones! can impact the balance of wealth and power among nations&M2: Growing powers therefore naturall regard aerospace development as critical to achieving great power stat$s. as in3icate3 b hun3re3s of testimonies #)## members have recor3e3 over the past two ears. &uman space pro!rams represent aroun3 20 percent of the 7:? billion in total /.$. a3ministration an3 con!ressional lea3ers shoul3 also consi3er the collateral 3ama!e to the space in3ustrial base if human space pro!rams were substantiall curtaile3. space an3 missile s stems sales from 2008.any secon3..an3 thir3-tier s$ppliers in particular operate at marginal vol$mes today! so even a small red$ction in their b$siness co$ld force some critical s$ppliers to e8it this sector.or!/filea3min/store3/p3fs/)J$(wp004. potentiall triggering a series of disr$ptive changes in the common ind$strial s$pply base that o$r entire space sector relies on& Aerospace %ey to military dominance and tech development 6ric%son! FhD Candidate at Frinceton! K W @#n3rew. Mour final Fuestion centers on other issues that shoul3 be consi3ere3 as 3ecisions are ma3e on the fun3in! an3 3irection for I#$#. %urther evi3ence of the catal tic role of human space missions is foun3 in a recent stu3 con3ucte3 earlier this ear b 2). $tu3 in! a nation6s aerospace 3evelopment therefore offers ke insi!hts into its !reat power ambitions an3 its capacit to realiNe them.his remains true to3a . $uch a cutback woul3 put even !reater stress on an alrea3 weakene3 strate!ic sector of our 3omestic hi!h-technolo! workforce. ) think it can be pre3icte3 with hi!h confi3ence that a ma5or cutback in /.p3f "$eiNin! the &i!hest Jroun3. an3 scientific space programs as well.D . Critical to great power stat$s today! . )n conclusion. %ebruar 1C-21. . a few of which )Oll show in brief vi3eo interviews at the en3 of m statement. . particularl in the human spacefli!ht area.prepare for an3 to pursue careers in the aerospace sector.eastwestcenter.$.

http://afa-wa. which 3emonstrates our lea3ership in this important sector an3 shows that we are on the ri!ht path to achievin! the clean ener! future envisione3 b +resi3ent *bama.1 billion.com/#erospaceT)n3ustr . %## estimates that over 1 billion passen!ers will use /.J %rancisco SOnche:! 5nder Secretary of Commerce for 'nternational Trade! addressed national and international gro$ps at the 2011 +aris #ir $how to reinforce the +resi3ent6s Iational .The ind$stry is %ey to achieving the Fresident+s goals of do$bling e8ports by the end of . Aerospace %ey to economy > trade 7AO " [ $eptember 2006. $YncheN note3 that the aerospace sector in the 5nited States s$pports more (obs thro$gh e8ports than any other ind$stry& $YncheN witnesse3 a si!nin! ceremon between 'oein! an3 #eroflot. 9 .he 0ashin!ton #erospace )n3ustr . Bomestic car!o revenueton miles are pro5ecte3 to increase at an avera!e annual rate of 4..@2ar . Bou!las &.6?? in 201?.The .rupo. 'oth passen!er capacit an3 car!o operations are e>pecte3 to continue to !row.A*$+#(.$. the /. with passen!er capacit in 200? increasin! b :.)D an3 s$pport the 5&S& aerospace ind$stry. Januar 2006. http://tra3e.!ov/press/press-releases/2011/aerospacein3ustr -critical-contributor-to-us-econom -062111.he 5&S& aerospace ind$stry is a strategic contrib$tor to the economy! national sec$rity! and technological innovation of the 5nited States!M $YncheN sai3.conom .6 percent an3 then increasin! b an avera!e of :..C percent of the total value of /.p3f "/.!ao.items/306C20.$.AM[..$. ") am particularl please3 to see the incre3ible accomplishments of /. with the in3ustr estimatin! 71?0 billion in sales an3 appro>imatel 629.$.J .>port )nitiative @I.he impact of the aerospace in3ustr on the /.. . ". +e3ersen. aerospace in3ustr consistentl shows a forei!n tra3e surplusGreachin! 741 billion in 200:.p3f ".J Air transportation is a vital f$nction of a modern economy& 't entails a variety of .asp "#ersopace )n3ustr (ritical (ontributor to /$ . /nite3 $tates Jovernment #ccountabilit *fficeZ Z http://www.-e>porte3 merchan3ise in 200:..846 in 2009 to 10. Aussia6s state-owne3 airline. Airline 'nd$stry is %ey to (obs in the aerospace ind$stry Conway and Federsen! economists! " @Aichar3 $. an3 the sales will support appro>imatel 1:.D .$. +avilion openin! remarks.$. the /.$. #erospace e>ports constitute3 6. #eroflot has or3ere3 ei!ht ???s value3 at 72. commercial aircraft fleet is estimate3 to !row from ?.000 people emplo e3 in 2009. .13 American companies represented in the 5&S& 'nternational Favilion demonstrate the innovation and hard wor% that ma%e $s leaders in this sector!M sai3 $YncheN.2 percent per ear until 201?. companies participatin! in the #lternative #viation %uels $howcase.$. June 21.-1-&M Burin! the /. econom is si!nificant. e>cee3in! 24 billion. %urthermore. airports b 2019.. 2011. )IB/$.$. #.!ov/new. #ccor3in! to %##.he importance of this in3ustr to the /.D .2 percent until 201?.000 5obs. econom will continue to !row in the future.-1K and contrib$ted 9=3 billion in e8port sales to the 5&S& economy in .

+acific #ero +ro3ucts emplo e3 16 workers earnin! 1: to :0 cents per hour.9 percent of total state emplo ment. Domestic airline ind$stry strength is %ey to the aerospace ind$stry Conway " @Aichar3 $.. 0illiam 'oein! foun3e3 the +acific #ero +ro3ucts (ompan an3 soon rename3 it the 'oein! #irplane (ompan . /ac%>to>bac% aerospace sl$mps contrib$ted s$bstantially to the last recession& .000 people in 0ashin!ton& This st$dy foc$ses on the aerospace ind$stry! which acco$nts for more than one>half of the employment in air transportation: \ The Bashington aerospace ind$stry primarily man$fact$res aircraft and parts.400 5obs or ?.he 'oein! (ompan .:00 people in 2009.akin! into consi3eration the 3irect an3 in3irect impact on the econom . ".100 5obs or 22. )n 1C2?. $purre3 b :8. 5ust thirteen ears after the 0ri!ht brothers took their first heavier-than-air fli!ht at Qitt &awk.he total impact of the in3ustr amounte3 to 116. Bespite a 3eclinin! emplo ment share.com/#erospaceT)n3ustr .C percent of total emplo ment in $nohomish (ount .800D an3 $nohomish (ount @24. the aerospace in3ustr emplo e3 69. air transportation emplo s more than 100. \ . the 1C84-C0 e>pansion create3 full one-fifth of the 5obs in the state econom to3a . 'A).% &)$.activitiesL aerospace man$fact$ring! air passenger and freight service! airport operations! air traffic control! air transportation arrangement! and other air s$pport services& . )nitiall . \ Ke3 b . inclu3in! the suppliers of these activities.1 percent of total emplo ment in Qin! (ount an3 92.?00D in 2009. the $eattle compan emer!e3 from the conflict as a ma5or aircraft manufacturer& After the war! /oeing devoted m$ch of its effort to developing aircraft for a promising commercial mar%et& . S$rging aerospace employment co$pled with a strong national economy triggered state economic booms in the late 1<=-s! 1<3-s! and 1<<-s. the 24-hour inau!ural fli!ht in a 2o3el :0# carrie3 mail as well as two-pa in! passen!ers.*AM The history of the aerospace ind$stry in Bashington is almost as long as the history of the airplane& )n 1C16.:00 5obs or 10.J Polatile demand& The demand for aircraft! whether stemming from the military or the world airline ind$stry! is highly volatile& 7iven that /oeing is a ma(or employer! the fl$ct$ations in aircraft demand have often sent ripples thro$gho$t the state economy& The ramp>$p in /oeing prod$ction d$ring Borld Bar ''! which led to K-!--.new (obs! helped p$ll the Seattle area o$t of the 7reat Depression& The s$bse@$ent lay>offs at the concl$sion of the war precipitated a recession. Bou!las &. http://afa-wa.000 new hires in the aerospace in3ustr . 'oein! forme3 a subsi3iar calle3 'oein! #ir .. the aerospace in3ustr accounte3 for an estimate3 20C. $ellin! bi-planes @2o3el (sD to the nav an3 arm 3urin! 0orl3 0ar ). the aerospace in3ustr can still impart si!nificant fluctuations to the 0ashin!ton econom @%i!ure :D. Januar 2006.he airline in3ustr be!an in 1C29 when (on!ress turne3 over the 5ob of fl in! mail to private contractors.ransport. \ . \ The aerospace ind$stry also acco$nted for K-!3-. \ 2ore than nine out of ever ten aerospace emplo ees worke3 in Qin! (ount @48. 2.o3a .p3fD .he 0ashin!ton #erospace )n3ustr . \ Bith an average ann$al wage of 93)!)=-! more than do$ble the average for all ind$stries! the aerospace ind$stry paid 9E&K billion in wages and salaries.(obs or . +e3ersen. an3 successfull bi3 on a fe3eral contract to fl mail between $an %rancisco an3 (hica!o.&< percent of total employment in the rest of the state. the forerunner to /nite3 #irlines.

he $tren!th to Kift #merica.aiaaerospace. our !overnment must 3evelop policies that stren!then the positions of all workers in all in3ustries.or!/assets/wpTstren!thTau!0C. #erospace contribute3 7C9. #erospace )n3ustries #ssociation of #merica. "#erospace an3 Befense: ..Aerospace dependent on Airline 'nd$stry 7ome: et al! $ndergrad$ate at 0arvard p$rs$ing a degree in @$antitative finance! 1. an3 e>port income. . an3 from the replacement c cle of a!in! turbines an3 aircraft that will be up!ra3e3 or overhaule3..1 (onservativel . aerospace sales alone account for 4-9 percent of our countr 6s !ross 3omestic pro3uct. an3 wa s to ensure that a proven economic success continues to en3ure an3 thrive. ['en &ur JomeN.1billion in e>port sales to #merica6s econom last ear.. .J +(+6s commercial sales depend s$bstantially on the prod$ction rates of both /oeing Company I/AJ and Airb$s ! which in t$rn depend $pon deliveries of new aircraft& The $ltimate drivers of orders and deliveries of aircraft are $nderlying air travel demand! financial health of airlines! growth prospects for airline capacity! and overall economic growth& The c$rrent increase in aerospace demand is dependent on increased spending by foreign carriers and domestic airlines who m$st $pgrade aging fleets& +(+ stan3s to benefit from e>pecte3 aircraft 3eliveries b 'oein! an3 #irbus.. especiall economic pro3ucers like aerospace an3 3efense.D . http://www.90 to 74 in further economic activit . #lan )brahim.he $tren!th to Kift #merica.$.2 #erospace pro3ucts an3 services are pillars of our nation6s securit an3 competitiveness. .wikinvest. continue3 hi!h oil prices. the aerospace in3ustr is soli3l an3 reliabl contributin! stron!l to the national econom an3 the lives of millions of #mericans.J #s the /. an3 ever aerospace 3ollar iel3s an e>tra 71. reliable en!ine of emplo ment. innovation.com/stock/+recisionT(astpartsT@+(+D."Bepen3ence on ke customers. #merica6s aerospace in3ustr remains a powerful. /an%r$ptcy of another airline. )n these challen!in! times. /. or the possibilit of a ma5or terrorist attack threaten to change the co$rse of the recovery in the aerospace cycle and li%ely impact FCF& Aerospace %ey to economy A'AA -< [#u!ust 200C.o accomplish this.p3f "#erospace an3 Befense: . 0e stron!l believe that keepin! this economic workhorse on track is in #merica6s best interest. econom moves throu!h uncertain times. #n factor that a3versel affects the aerospace in3ustr @similar to the tra!ic events of C/11 or the $#A$ travel scareD woul3 likel pressure +(+6s operations an3 profitabilit . John $imon.$.his paper e>plains what6s at stake. http://www.

ven thou!h co$ntries s$ch as China! 'ndia! and /ra:il have profoun3 political. 'ush.he current recession is the result of a 3eep financial crisis.he 3ecline of ta> revenues an3 massive counterc clical spen3in! put the /. 'ritish lea3ers conclu3e3 that the lacke3 the economic capacit to maintain a presence "east of $ueN. not a mere fluctuation in the business c cle. an3 allow the $oviet /nion to fra!ment.urope.0.. )t was the economic 3evastation of 'ritain an3 %rance 3urin! 0orl3 0ar )). 2011 @". !overnment on an unsustainable fiscal path. and this co$ld alter the global distrib$tion of power& These trends co$ld in the long term prod$ce a m$lti>polar world& 'f 5&S& policyma%ers fail to act and other powers contin$e to grow! it is not a @$estion of whether b$t when a new international order will emerge& The closing of the gap between the 5nite3 States and its rivals co$ld intensify geopolitical competition among ma(or powers! increase incentives for local powers to play ma(or powers against one another! and $nderc$t o$r will to precl$de or respond to international crises beca$se of the higher ris% of escalation. which cr stalliNe3 un3er Jorbachev. . as well as the rise of other powers. from the /niversit of (hica!o.s$dden stopM in credit mar%ets for 5&S& debt! the 5nite3 States wo$ld be $nable to roll over its o$tstanding obligations! precipitating a sovereign>debt crisis that wo$ld almost certainly compel a radical retrenchment of the /nite3 $tates internationally. their economies are growing faster than ours. #ccesse3 02-08-2011D . . serve3 as the 3irector of polic plannin! at the Befense Bepartment 3urin! the +resi3enc of Jeor!e &. that le3 both countries to relinFuish their empires. contribute3 to their 3ecisions to with3raw from #f!hanistan. %ebruar 8th.he . S$ch scenarios wo$ld reshape the international order.conom an3 Iational $ecurit . 3emo!raphic. econom G ultimatel totalin! almost 490 percent of JB+ G an3 the 3evelopment of cre3it-fuele3 asset bubbles.he crisis was prece3e3 b the buil3up over two 3eca3es of enormous amounts of 3ebt throu!hout the /. 0e face this 3omestic challen!e while other ma(or powers are e8periencing rapid economic growth.com/articles/print/29C02:. economic and fiscal trends pose the most severe long>term threat to the 5nite3 States6 position as global leader& Bhile the 5nite3 States s$ffers from fiscal imbalances and low economic growth! the economies of rival powers are developing rapidly& The contin$ation of these two trends co$ld lead to a shift from American primacy toward a m$lti>polar global system! leading in turn to increased geopolitical rivalry and even war among the great powers.$. if $nanticipated events trigger what economists call a . National Review. hu!e amounts of wealth were 3estro e3.ven worse. . 0hen the bubbles burst. Aecover is likel to be protracte3.nationalreview.B. .$. +ublicl hel3 national 3ebt rose from 48 to over 60 percent of JB+ in three ears. )raF. particularl in the housin! sector. aban3on (ommunist re!imes in . #vailable *nline at http://www. social. an3 economic problems. $oviet economic weakness..astern . )n the late 1C60s. (ounselor at the (enter for $trate!ic an3 )nternational $tu3ies. an3 unemplo ment rose to over 10 percent. hol3s a +h.o3a . The sta%es are high& 'n modern history! the longest period of peace among the . an3 the /nite3 Iations 3urin! the presi3enc of Jeor!e 0..NC 'mpacts 6conomic growth is vital to prevent the collapse of 5&S& hegemony& Ghalil:ad 11 G Ralma QhalilNa3. 'ush. Bitho$t faster economic growth and actions to red$ce deficits! p$blicly held national debt is pro(ected to reach dangero$s proportions& 'f interest rates were to rise significantly! ann$al interest payments G which alrea3 are lar!er than the 3efense bu3!et G wo$ld crowd o$t other spending or re@$ire s$bstantial ta8 increases that wo$ld $nderc$t economic growth. . 'f the 5&S& debt problem goes critical! the 5nite3 States wo$ld be compelled to retrench! red$cing its military spending and shedding international commitments. serve3 as the /nite3 $tates ambassa3or to #f!hanistan.

he *bama a3ministration has wisel move3 to stren!then relations with allies an3 potential partners in the re!ion but more can be 3one. )n !arnerin! political support for cutbacks. the /. the presi3ent an3 members of (on!ress shoul3 point not onl to the 3omestic conseFuences of inaction G but also to the !eopolitical implications. shoul3 not let these opportunities pass.he ke remainin! Fuestion is whether the presi3ent an3 lea3ers of both parties on (apitol &ill have the will to act an3 the skill to fashion bipartisan solutions. . . the /nite3 $tates is the most si!nificant barrier facin! (hinese he!emon an3 a!!ression. 0hether we take the nee3e3 actions is a choice. ultimatel .hese are promisin! options. weaker powers ma shift their !eopolitical posture awa from the /nite3 $tates. an3 reform the ta> co3e @b re3ucin! ta> e>pen3itures while lowerin! in3ivi3ual an3 corporate ratesD. cruise. #lternativel . Aepublican members of (on!ress have outline3 a plan. to work our wa throu!h the kin3 of crisis that we face to3a . hi!hli!htin! human-ri!hts Fuestions woul3 not onl 3raw supporters from nearb countries but also embol3en reformers within (hina. #merican institutions G particularl those provi3in! enforceable rule of law G set it apart from all the risin! powers.$. lon!-ran!e stealth aircraft.his can be 3one in cost-efficient wa s. $ome consensus e>ists on measures to pare back the recent increases in 3omestic spen3in!. (hina6s militar assertiveness shoul3 enable securit cooperation with countries on (hina6s peripher G particularl Japan. Japan. 0hile we face si!nificant challen!es. inclu3in! +resi3ent *bama6s 3ebt commission. . # culture of innovation.he /nite3 $tates can 3o so b si!nalin! that its 3omestic challen!es will not impe3e its intentions to check (hinese e>pansionism. #mericans have respon3e3 pra!maticall . 0hile (hina6s economic rise enables its militar mo3erniNation an3 international assertiveness. . &istoricall . an3 a vital sector of small an3 me3ium-siNe3 enterprises propel the /. an3 Lietnam G in wa s that complicate 'ei5in!6s strate!ic calculus. (hina6s strate!ic mo3erniNation is aime3. $ocial cohesion un3erwrites political stabilit . an3 anti-satellite capabilities. )n3ia. .$. econom in wa s 3ifficult to Fuantif . $ince 'ei5in!6s over-the-top reaction to the awar3in! of the Iobel +eace +riNe to a (hinese 3emocrac activist alienate3 .ven as cooperative economic ties in the re!ion have !rown. m$lti>polar systems have been $nstable! with their competitive dynamics res$lting in fre@$ent crises and ma(or wars among the great powers& ail$res of m$lti>polar international systems prod$ced both world wars.$. 'ei5in!6s economic rise has enable3 a 3ramatic militar buil3up focuse3 on acFuisitions of naval. an3 the /. )t is clearl within our capacit to put our econom on a better tra5ector . As rival powers rise! Asia in particular is li%ely to emerge as a :one of great>power competition. in seekin! to accommo3ate the stron!er powers.uropean lea3ers. $till.ither wa .ast #sia an3 elsewhere G shoul3 be use3 to fashion a coalition in favor of a more balance3 tra3e s stem. )n3ia. an3 sometimes throu!h trial an3 error. ' contrast. 7iven the ris%s! the 5nite3 States m$st foc$s on restoring its economic and fiscal condition while chec%ing and managing the rise of potential adversarial regional powers s$ch as China.he polic Fuestion is how to enhance economic !rowth an3 emplo ment while cuttin! 3iscretionar spen3in! in the near term an3 curbin! the !rowth of entitlement spen3in! in the out ears. an3 $outheast #sian states. at 3en in! the /nite3 $tates access to the seas aroun3 (hina. (hina6s e>pansive territorial claims G an3 provocative statements an3 actions followin! crises in Qorea an3 inci3ents at sea G have roile3 its relations with $outh Qorea. an3 ballistic missiles. /. it shoul3 take steps to prevent a flare-up in #sia. . however 3ifficult it mi!ht be. it also fri!htens rival powers. Since the end of the Cold Bar! a stable economic and financial condition at home has enabled America to have an e8pansive role in the world& Today we can no longer ta%e this for granted& 5nless we get o$r economic ho$se in order! there is a ris% that domestic stagnation in combination with the rise of rival powers will $ndermine o$r ability to deal with growing international problems& 1egional hegemons in Asia co$ld sei:e the moment! leading the world toward a new! dangero$s era of m$lti>polarity. .great powers has been the era of 5&S& leadership. . econom still accounts for over 20 percent of the worl36s JB+. #s the /nite3 $tates !ets its economic an3 fiscal house in or3er.$. (hina6s mercantilist policies an3 currenc manipulation G which harm 3evelopin! states both in . restrain future !rowth in 3efense spen3in!. have 3one so as well. 3emo!raphic tren3s are healthier than those of an other 3evelope3 countr . . $everal think tanks an3 commissions. $ome (hinese policies encoura!e other parties to 5oin with the /nite3 $tates. American retrenchment co$ld have devastating conse@$ences& Bitho$t an American sec$rity blan%et! regional powers co$ld rearm in an attempt to balance against emerging threats& 5nder this scenario! there wo$ld be a heightened possibility of arms races! miscalc$lation! or other crises spiraling into all>o$t conflict. e>cellent institutions of hi!her e3ucation. hostile states wo$ld be emboldened to ma%e aggressive moves in their regions.

ATs .

especially when electricity is produced in non-carbon-intensive ways. Section 5 asks if it makes sense to increase the availability of high-speed rail alternatives.(B Aeport.J Given the limited scope for cheap greenhouse gas abatement in aviation. relevant in an ex ante analysis. and (b$ environmental benefits play a fairly minor role in the overall eval$ation of high>speed rail pro(ects& . !""#$ and maintenance. 0igh>speed rail can s$bstit$te for air transport on mid>range distances and prod$ces fewer emissions per trip.g.ATL 0$rst 6nvironment The environmental benefits of trains over planes are small Transport 1esearch Center < [*ctober 200C. owever.. a broader comparison of costs and benefits shows that (a$ high> speed rail lin%s are socially desirable in a certain set of circumstances and sho$ld not be viewed as a general alternative to air transport. #irlines an3 &i!h-$pee3 Aail. e...or!/5trc/3iscussionpapers/B+200C0?.p3f "(ompetitive )nteraction between #irports. http://www. Chester and orvath. *.internationaltransportforum. 0owever! life> cycle emissions. for rail arguably are high. given the high emissions from trac% infrastr$ct$re constr$ction (see.

69 billion.!o.. http://abcnews. Bepartment of . Airlines doing worse than e8pected A/C News -<+ @$cott 2a erowitN.9 million in the same perio3 a ear earlier. Jul 22n3 200C.com/'usiness/stor Ui3V81:048?<pa!eV1]. the thinkin! was the airlines coul3 return to profitabilit b sprin! [ .he 'ureau of . .P American Airlines reported last week that it lost 9)<. sai3 the airline ind$stry?s operatin! profit sl$mped to 91&1E billion in the fourth Fuarter. %ees to chan!e fli!ht reservations totale3 796?.ransportation $tatistics sai3 /&S& airlines recorded a )-* year>over> year drop in operating profit in the fo$rth @$arter.Affirmative 0igh f$el prices and less baggage money have p$t airlines on the brin% Ball Street 2o$rnal! 1.$: /$ #irlines := *peratin! +rofit $lumpe3 401 Bespite &i!her Aevenue.1 million from *ctober to Becember 2011.$.$. $outhwest announce3 that it ha3 earne3 79: million in the #pril-June perio3 but that was 3own 3ramaticall from the 7421 million earne3 3urin! the same perio3 last ear. the compan ha3 a !iant loss of 72. #s part of their fourth-Fuarter revenue. an in3epen3ent airline anal st. sai3 3escribin! the earnin!s announcements so far& C0ith the fuel lower than last ear an3 with the capacit cuts. $nderscoring the ongoing challenge of high costs to f$el planes. consumers will pa the price throu!h hi!her airfares.?: billion.html ""'.. [2a 12.E= million& . #nal sts consi3er /nite3Os financial position to be the most precarious of all the ma5or carriers.J .ransportation. .ws5. rose 61 to 7:6..com/article/'.3&3 million a ear earlier. 3own from 91&"K billion a year earlier& *peratin! revenue.hat 3i3nOt turn out to be the case. up sli!htl from 799C. http://online. a unit of the /. million in baggage fees! down from 93.he '. more fees an3 si!nificantl fewer choices& CThe ind$stry is doing worse than we had tho$ght. Kast ear at this time. /nite3 #irlines parent compan /#K earne3 a profit of 728 million but that was thanks to one-time !ains.million in the secon3 Fuarter! Continental Airlines T$esday anno$nced a 9.-.P Aa Iei3l.ven the !oo3 news from the airlines isnOt that !oo3.-(*-2012091??1082?.IkbLMu+=D 2.$ 0hile some parts of the econom are showin! si!ns of recover ! the airline ind$stry looks like it is headed for a t$rb$lent ride! en3in! with at least one ma(or carrier possibl going o$t of b$siness& # 3eathl combination of b$siness travelers staying home! decreased cargo and more flights than there is demand has led the nation?s ma(or airlines to spend more money than they are ta%ing in from tic%et sales& /ltimatel .any airlines have reported deteriorating profitability in recent @$arters as climbing f$el costs chip into reven$e gains.1) million loss for the same perio3 an3 Delta! the world?s largest carrier! 0e3nes3a mornin! said it lost 9. . meanwhile. airlines collected 9=<.

0ith the option of travelin! between the two cities in 5ust two hours an3 :0 minutes on hi!h-spee3 rail. sai3 international travelers stay longer and spend more money than domestic visitors& #n increase in such travel coul3 intro3uce $an %rancisco to a whole new market of future tourists.com/local/transportation/2012/0:/hi!h-spee3-rail-coul3-freevaluable-space-sfo]i>NN1 uko&C(3D 0hile the state6s hi!h-spee3 rail pro5ect is e>pecte3 to re3efine how people travel on trains! local officials are ban%ing on the plan having an e@$ally important impact in the s%ies.And with high>speed rail! we+ll be able to red$ce the n$mber of short>ha$l trips to the Aos Angeles /asin and introd$ce more international flights&M Aaurie #n3erson. Bhile lower f$el prices are good news! airlines have lots of other problems! so be choos when pla in! the sector. 0hen fuel prices are low. 0hen fuel prices are hi!h.he (it an3 the Kos #n!eles area acco$nt for 1E percent of all domestic travel at the $an %rancisco )nternational #irport. sai3 #n3erson. that6s known as capacit plannin!. the can increase capacit b fl in! lar!er aircraft.sfe>aminer. ".9 billion in annual "win3fall. the healthier our cit is.$ Aower oil prices gave most 5&S& airline stoc%s a bo$nce last wee% — not a s$rprising development since f$el acco$nts for as m$ch as K-* of an airline+s operating costs& J+2or!an @IM$.+ @0ill Aeisman. a 3evelopment that woul3 open up more !ates for lucrative international an3 transcontinental travel at $%*. bu in! an oil refiner D. .com/local/transportation/2012/0:/hi!h-spee3-rail-coul3-freevaluable-space-sfo &i!h-spee3 rail coul3 free up valuable space at $%* http://www.:B#KD case.0S1 only trades off with inefficient and e8pensive regional flights The68aminer 1.sfe>aminer.he more visitors we !et. a spokesman for $%*. . 2a 2Cth 2012. they can also lose big when f$el prices fall $ne8pectedly& The . "There is no @$estion that international travel brings a m$ch higher economic benefit to the region!M sai3 (harles $huler.com/2012/09/:-reasons-lower-fuel-prices-wont-liftairlines/D 2.ess in 6$rope The sit$ation in 7reece will %eep casting a pall over 6$rope in the near . hi!h-spee3 rail also coul3 re3uce connectin! fli!hts to $%* from (entral Lalle cities such as %resno an3 2o3esto. spokeswoman for the tourism !roup $an %rancisco . more fuel-efficient aircraft. airlines are more likel to re3uce capacit b fillin! all the seats in smaller.investorplace. an3 3etermine how to !et the most ban! for their fuel buck.:J+2D anal st Jamie 'aker last week estimate3 that the savin!s from lower fuel woul3 create 79. #lthou!h most airlines tr to miti!ate hi!h fuel prices with tactics like he3!in! @or in Belta #ir Kines6 @IM$.+ @$usan J. #luise is presi3ent of Iational Iews $ n3icate an3 she has been a 5ournalist for more than thirt ears. Airline fail$re inevitable D fo$r warrants Al$ise 1.com a Fualifie3 source http://www. 0ere are fo$r reasons to do$bt the sector+s latest attempt to ascendL $el Frice Polatility 't+s not ($st high (et f$el prices that are eating airlines+ collective l$nch — it+s wild swings in f$el prices. Small! inefficient flights between . public polic 3irector at the $an %rancisco (hamber of (ommerce.A plane with ). (arriers make ver precise measures of suppl an3 3eman3. )n the commercial aviation in3ustr ..people from resno ta%es the same slot as a K-->person ($mbo (et from /ei(ing!M sai3 Jim KaNarus.. http://www. travelers ma start eschewin! the short fli!hts. profits for the airlines.0igh> speed rail will eliminate that problem! and allow for a higher fre@$ency of large planes to land at the airport.ravel. )nvestorplace. . #lon! with re3ucin! air travel to Kos #n!eles.

.:#KQD.5ohnka . 6ven so! the merged carrier still str$ggled with its labor $nions& 5nited Continental is fightng thro$gh ma(or comp$ter integration glitches now! and its c$stomer approval has pl$mmeted& . on par with ta>es for alcohol an3 tobacco. $eptember 2?th. matters are no better& /$ #ir is un3er (hapter 11 protection. #merican #irlines @+)IQ:##2A=D an3 /$ #irwa s @IM$.ran. 2009 http://www.* Iicholas . economies of scale an3 financial benefits. 'ut then there are businesses which !overnments are keen on. 7 0igher TSA Ta8es Airlines aren+t getting a lot of help from Congress& A %ey Senate committee last wee% advanced a bill that wo$ld do$ble transportation sec$rity ta8es from the c$rrent 9.ran @IM$.D an3 $k 0est @I#$B#=:$QM0D. 'ut $outhwest6s fli!ht atten3ants last week vote3 3own a 3eal that woul3 have allowe3 the carrier to fl internationall or over water. which alrea3 flies to 2e>ico. 2er!er &iccups (onsoli3ation has been proven time an3 a!ain to be a !oo3 thin! for airlines: )t 3elivers broa3er reach.hat affects ever airline inclu3in! $outhwest-#ir. ")t6s a simple eFuation: Bhen yo$ add ta8es! demand for air travel is dampened! res$lting in lost (obs and lost air service!M sai3 #:# +resi3ent an3 (. #ir. 5&S& airlines will need to decrease capacity to 6$rope as the year wears on& Airlines for America IAKAJ! the trade gro$p that represents 5&S& carriers! says airlines will c$t capacity to 6$rope by nearly 3* in the fo$rth @$arter of this year& .ran6s 'oein! @IM$. #lthou!h 2r 'uffett en!ineere3 a profitable e>it from his investment. Belta alrea3 has announce3 plans to cut its trans-#tlantic capacit b 91 after Kabor Ba . "*ur customers to3a pa 201 W 760 on an avera!e 7400 3omestic roun3trip ticket W of their ticket prices in ta>es.com/2009/0C/2?/airlinesan3-the-canine-features-of-unprofitable-in3ustries an3 John Qa is an 'ritish economistD The efficient ind$stry hypothesis s$ggests that if an ind$stry loo%s partic$larly attractive! or $nattractive! then companies will enter! or leave.. $pirit @I#$B#=:$#L.:'#D ?1?s to Belta so that the combine3 carrier coul3 stan3ar3iNe on the 'oein! ?4?. alon! with /nite3 #irlines an3 now Belta an3 Iorthwest #irlines& The ban%r$ptcy co$rt ($dge is as essential to yo$r flight as the pilot& . Jet'lue @I#$B#=:J'K/D. /nite3 (ontinental @IM$.. Thorny iss$es li%e these pose significant challenges for combined carriers it the near term& Airline ind$stry is not %ey to the economy> stoc% mar%ets Gay -E+ @John Qa . in lar!e part because Aichar3 #n3erson.ran.hat coul3 be tou!h on earnin!s because .f$t$re — and the continent already had been headed toward recession& That+s bad news for 5&S& airlines that fly there! like Belta. $outhwest has ma3e some pro!ress G notabl subleasin! #ir.:K/LD. last week launche3 new international fli!hts to that countr an3 to +uerto Aico.arl into the process of inte!ratin! operations with #ir. #laska #irlines @IM$.urope remains /.he $a!e of *maha ar!ues that in3ustr factors !enerall 3ominate profitabilit : "0hen a mana!ement with a reputation . acknowle3!in! his mistake in bu in! stock in /$ #ir @now known as /$ #irwa sD. pro3ucts ta>e3 to 3iscoura!e their use.:/#KD.:K((D. ha3 spent more than three ears runnin! Iorthwest in the earl 2000s. airlines6 lar!est international market. &e sai3 this in 1CC1.&E.he airline in3ustr is one of them an3 governments fight to allow their ta8payers to po$r ever more money into blac% holes& 0arren 'uffett observe3 that the world airline ind$stry has not made a dime for investors in a cent$ry of manne3 fli!ht. 'ut marria!e is eas compare3 to the 3ail challen!es of livin! to!ether after the hone moon. B#K6s chief. Belta6s combination with Iorthwest in the mi33le of the Jreat Aecession was acclaime3 as a success stor . (alio. revenue is still likel to take a hit.for a one>way flight segment to E& . until the attractiveness or unattractiveness 3isappears. #lthou!h carriers will pass the ta> hikes on to their passen!ers.$.

and neither can airlines.ws5. http://www. thou!h. forcin! both to rethink sche3ules an3 a35ust aircraft 3eplo ment to boost profits. fuel costs are still too hi!h. presi3ent of Bubaibase3 .2 million #ustralian 3ollars @/$7881.bloomber!.$. sai3 in an interview. . .C61 stake.com/news/2012-06-04/wh -u-s-airlines-nee3-to-a3apt-to-a-slow!rowth-future.tiha3 sai3 it woul3 like to raise its hol3in! to at least 101. which has been anemic at best for more than a decade! even when the economy was e8panding& Steadily dropping fares are the only reason traffic has grown at all since . $in!apore #irlines Kt3. centsD each 2on3a .ues3a it has bou!ht a nearl :1 stake in =antas rival Lir!in #ustralia Kt3.8 billion. #siaOs carriers last ear earne3 :?1 less in net profit than in 2010. # spokesman for . ..mirates #irline.C million on . 'ut what !ives an in3ustr a reputation for ba3 economicsU ) have alwa s favoure3 the efficient in3ustr h pothesis. . sai3 it was consi3erin! whether to accelerate the retirement of a!in! aircraft after it warne3 of P3isappointin!P first-half financial results.he euro is !oin! south. can’t increase its business through constant price cutting.J 0igher f$el costs and a treachero$s economic environment are weighing on global airlines! inclu3in! =antas an3 .tiha3 operates 2: fli!hts a week between #bu Bhabi in the +ersian Julf an3 #ustralia. P.Cola Co.iddle 6ast airlines! once perceived to be imm$ne from global trends! have started to voice concern abo$t b$siness conditions& P't?s a perfect storm of adversity now facing airlines!C .html. at /$7:. L#&. ["0h /$ airlines nee3 to a3apt to a slow-!rowth future. (atha +acific #irwa s Kt3. an3 Qorean #irlines recentl poste3 Fuarterl losses. 'f inflation-adjusted fares hadn+t dropped 1= percent from .J Yet 5&S& airlines face a long>term challenge that should concern industry executives as well as investors. leavin! the compan with a market capitaliNation of C06.---& And witho$t s$bstantive cost> c$tting innovation in the ind$stry.im (lark.hat !ives an implie3 valuation of #749. the business analo!ue of the efficient market h pothesis& Decline of domestic air travel inevitable > decreased demand /loomberg News "#)#1. Coca.001 $hares in Lir!in #ustralia close3 at :1 #ustralian cents @:0 /..to . Kast month.-1-! my research suggests that domestic travel wo$ld have declined& 0igh f$el prices and economic trends cr$shing the airline ind$stry now Ball Street 2o$rnal! 2$ne E [ Jlobal #irlines %l )nto O$tormO http://online. 6ven fast>growing .for brilliance tackles a business with a reputation for ba3 economics.mirates #irline. That impediment isn+t wages! f$el prices or a stagnant economy. that pace isn+t s$stainable. it is the reputation of the business that remains intact.P #mi3 those challen!es. 't+s growth in demand for air travel.--. the poun3 is !oin! south.html.com/article/$'10001:2:092?02404C1820:9??::80448??:1??26.#/ 0. accor3in! to the #ssociation of #sia +acific #irlines.9 millionD.tiha3Os 4.tiha3 #irwa s of #bu Bhabi sai3 .

com/hottopics/lnaca3emic/D Frospects that Congress will resolve a bitter deadloc% over long>term federal f$nding for aviation this year are slim! $enate (ommerce (ommittee (hairman John B.mirates cautione3 that many global carriers co$ld be forced to retrench. . Kast month. http://www..(B Aeport.a barrel! from abo$t 5S91--! to revive margins& F$blic f$nded rail is both environmentally and economically better than air networ%s Transport 1esearch Center < [*ctober 200C. (lark of . P0e cannot continue on this 3isastrous path.J Be Aus6 @2008D anal sis consi3ers hi!h-spee3 rail pro5ects at the level of in3ivi3ual links.P Aockefeller sai3. @2008D analyse a 6$ropean networ% of high>speed rail connections @a )--%m#h . (lark a33e3 . at least when access char!es are base3 on short-run mar!inal costs @an3 the train operator ma>imises profits in a 3ere!ulate3 environmentD.he issues that have stalle3 a compromise on bills earlier this ear in the $enate an3 &ouse affect a relative han3ful of the millions of #mericans who will fl this ear.. 3eman3 an3 3iscountin!. P) 3o not un3erstan3 ./ r$ling is e8pected to have its most immediate impact on Delta! which has so far staved off $nion organi:ers& P) am an!r at the situation.La. *. )n contrast.ear net profit fell ?21 after the compan took a /$71. if deficits resultin! from short-run mar!inal cost pricing are financed from costly p$blic f$nds! the networ% passes the cost>benefit test. an aviation in3ustr !roup. #irlines an3 &i!h-$pee3 Aail. an3 not so much to 3ifferent assumptions on costs.. comes at a critical hour. but we do stand on the precipice of losing another AA rea$thori:ation bill this ear. .D sai3 in a33ressin! the #ero (lub of 0ashin!ton.6 billion hit from hi!h fuel costs. &ouse Aepublicans are 3ea3 set on un3oin! a rulin! b the Iational 2e3iation 'oar3.he con!ressional stalemate.or!/5trc/3iscussionpapers/B+200C0?. Airlines loosing federal f$nding now Bashington Fost 11+ @Iovember 19th. where the shape of the network is 3etermine3 within the anal sis. . an3 the primar han!-up is of interest to har3l an of them.2r. 'f rail is re@$ired to brea% even! the networ% is not worthwhile& )nstea3.he fin3 that the . Aockefeller )L warne3 2on3a . P0eOre willin! to 3o what we have to 3o.p3f "(ompetitive )nteraction between #irports.. but on the other si3e of the buil3in! there?s no movement and no give& *nce a!ain we are stalled&C . )t is a 3ispute over a labor rulin! that woul3 make it easier for emplo ees of Belta #ir Kines to unioniNe. Adler et al. http://www.le>isne>is. which le3 to a shut3own of the %e3eral #viation #3ministration this summer.he 3ifference between the outcomes of both stu3ies is attributable to network effects an3 to assumptions on pricin! rules an3 bu3!etar constraints.P Aockefeller @B-0.mirates sai3 its latest fiscal.I networ% an3 a 160km/h conventional networkD.internationaltransportforum.and 5S9<.he rulin! ne!ate3 a lon!-stan3in! rule that sai3 eli!ible voters who opte3 not to vote woul3 be counte3 as votin! a!ainst unioniNation& The N. which sai3 that airline unioniNation efforts shoul3 be 3eci3e3 b a ma5orit of those who vote& .ues3a that the price of /rent cr$de oil will need to drop to between 5S93. 2r. #irlines are reluctant to be!in investin! up to 710 billion in a revolutionar air traffic s stem without confi3ence that the %## has lon!-term fun3in! to 3evelop the plan& . 2011.I network prod$ces net benefits Iand higher benefits than an all>air networ%D.

an3 fe3eral subsi3ies to provi3e re!ular airline service to rural airports& CNone of these iss$es is more important than the development of the ne8t>generation traffic control system! not even close!C Aockefeller sai3. P0e will have almost nothin! to sa to each other. the small issues that 3ivi3e us ma ultimatel 3ictate the outcome.D has sai3 that Aepublicans woul3 be willin! to compromise if the $enate woul3 a!ree to allow union 3ecertification b a simple ma5orit vote.how this fi>ation with one airline can be seen as paramount [such. Aockefeller sai3 failure to pass a lon!-term %## bill this ear coul3 prove catastrophic.P (on!ress has approve3 22 short-term fun3in! e>tensions since the last fun3in! bill e>pire3 in 200?.P . The other iss$es holding $p the bill have been the n$mber of slots that sho$ld be allocated to airlines $sing 1eagan National Airport! !overnin! where those planes shoul3 be authoriNe3 to fl . CCongress may abandon reg$lar AA a$thori:ation bills altogether in favor of more discrete aviation legislation or ($st plain c$ts& # lot of people are ver much in favor of that.that the 0o$se wo$ld sh$t down the AA to get its way! which the 3i3.ransportation (ommittee (hairman John K. 0ith bu3!et cuts loomin!.P he sai3.ues3a mornin! with three of his counterparts in the &ouse an3 $enate. P)f the %## reauthoriNation 3oes not pass soon! ' believe it will be a long time before an AA rea$thori:ation will pass any Congress!C he sai3. PIevertheless. Aockefeller sai3 he woul3 take part in a bipartisan meetin! .P &ouse . 2ica @A-%la.

***6ssential Air Service Disad*** .

Negative .

usuall worth between 71 million an3 72 million a ear. an3 $cottsbluff. ouse panel boosts rural air service subsidies. Ieb. t)e subsidies cost -1. .6 5erg said on the ouse floor in 9ebruary. /ow. 3In Nort) 4a&ota. leading more cities to re1uire ta.B. 'une ().scanaba.ues3a . .. were amon! those who fou!ht to save it.com 6/19 (%ssociated &ress. when it was 2ust 35" million. an3 $ault $te.S WASHIN !"N # !ea $art% lawma&ers 'rom rural areas were amon( t)ose 'i()tin( t)e )ardest to $reserve tax$a%er subsidies 'or airline 'li()ts into and out o' small towns last ear after senior Aepublicans trie3 to eliminate the oft-criticiNe3 pro!ram.he subsi3ies can reach hun3re3s of 3ollars per ticket G an3 can e>cee3 71. Qan. $o when &ouse Aepublicans last ear took up le!islation renewin! fe3eral aviation pro!rams it containe3 a provision to eliminate the pro!ram b 2014. !)at &ind o' s$iral )as earned t)e $ro(ram man% detractors amon( (overnment watc)do( (rou$s and anti2waste conservatives. )nstea3 of killin! the air subsi3ies. . A-I. $uch subsi3ies work out to as little as 76 per passen!er for airports like (o3 . 0 o. 2arie. +ueblo.6 million but /um$ed to -101 million in *+1+ and to -19.& 0igh Speed 1ail trades off the 6ssential Air Frogram .fo.t year.1NC Shell 1. airlines pulled out of smaller unsubsidi4ed markets. !"(!.3 'er!. !""(. terrorist attacks.000-plus cases.B.ssential #ir $ervice pro!ram is a pro3uct of 3ere!ulatin! the airlines 3urin! Jimm (arterOs presi3enc . air$orts li&e 5amestown and 4evil6s 7a&e would not be able to $rovide critical air service wit)out t)is su$$ort.hat !ot the attention of newl -electe3 tea part freshmen.ues3a came as the panel also move3 to cut foo3 ai3 to poor nations overseas an3 fun3in! for implementin! new 0all $treet re!ulations. P'lue Bo!P Bemocrats. an3 Qristi Ioem.. to subsi3iNe airlines that serve airports such as .. %fter the Sept.. . but critics of the pro!ram sa more nee3s to be 3one to shelter ta>pa ers from runawa costs.000 in a few routes. 2ich. Essential Air Service subsidies now FoxNews.news. 67ural regions rely on (the 8ssential %ir Service subsidies$ for vital air transportation.. /e. million 'or t)e on(oin( bud(et %ear.he . rural conservatives like 5erg dropped the anti-government rhetoric when a program is popular back home.. (on!ress in %ebruar approve3 a watere3-3own set of chan!es when passin! a measure renewin! fe3eral aviation pro!rams. 'ut subsi3ies can often reach hun3re3s of 3ollars each wa on a roun3 trip fli!ht to an3 from isolate3 places like Qalaupapa on the islan3 of 2olokai in &awaii or Jreat 'en3. Just as the support much-maligned farm subsidies.he subsi3ies increase approve3 . the &ouse vote3 to eliminate the pro!ram in the lower :8 states b 2014.payer subsidies to keep their flights. the ouse %ppropriations Committee is awarding the program an (( percent budget hike. whose three or so passen!ers a 3a benefite3 from a subsi3 e>cee3in! 7600 in 2010. . http*++www. ((. 2ich. A-$. Ioem an3 others won public assurances that the pro!ram woul3 not be kille3 in the en3. # recent chan!e to the pro!ram will soon take care of such 71. man of whom reclaime3 for the J*+ 3istricts occupie3 b rural. the most recent ear for which 3ata is available. however. Kast ear. 'ut rural tea part lawmakers like Aeps.he pro!ram awar3s contracts..com+us+!"(!+"-+()+house-panel-boosts-rural-air-servicesubsidies+$.he program0s budget has 1uadrupled since the !""( budget year. . Aick 'er!. In *++9. It was establis)ed to (uarantee t)at small communities would continue to (et commercial air services even t)ou() t)e routes were no lon(er $ro'itable a'ter dere(ulation. (olo. th e subsi3ies woul3 reach a recor3 721: million un3er a bill the J*+-run committee approve3 . .

&arrill sai3... Kouis for 79C per trip...$ 3ail . )n the case of the 5oint municipal airport at %ort Keonar3 0oo36s %orne %iel3.hurs3a evenin! meetin!. receive3 the contract an3 is offerin! multiple fli!hts per 3a to $t.. "0e think it6s an important service to our communit an3 we are !oin! to tell our con!ressional lea3ership of the importance of that service.facebook.o3a . but $enator John 2c(ain has offere3 an amen3ment to repeal the entire pro!ram. $t. out!oin! boar3 chairman 2ike %rance.$ http://www. "2a be we nee3 to be focusin! on the movement 3evice of the 21st centur versus the movement 3evice of the 1Cth centur . but the "essential air service.he %## reauthoriNation bill calls for an a33itional 7?4 million for the . B. )& 6ssential Air Service is %ey to economies of small pop$lation centers Sch$mer 11+ @(huck $chumer. an3 it6s similar to a trip ma3e several ears a!o. 5&S& $enator (harles .000 annual passen!ers has come un3er scrutin . /$ senatorZ 2. (ape #ir.ven the hi!hest spee3 trains 3on6t !o as fast as a :00 mph aircraft. ur!e3 airport boar3 members atten3in! the conference to emphasiNe the benefits of air service over rail lines to +ulaski (ount .phpU noteTi3V10190:001220199?6<i3V19??124C:06D . /n3er the fe3eral pro!ram. Aobert (it #3ministrator #lan (lark. a 2assachusetts-base3 carrier.#$ pro!ram that $chumer supports.. 0a nesville (it #3ministrator 'ruce &arrill tol3 airport boar3 members that he. $chumer announce3 his opposition to a propose3 amen3ment to cut the .o33 2aurina.phpUview$tor V26?1.(. who previousl serve3 as the $t. http://www..ssential #ir $ervices @.a$rina 11+ @Barrell .. ") ori!inall aske3 the ma ors if the wante3 to atten3 an3 then #lan (lark an3 ) kin3 of !ot 3ele!ate3 an3 2ike %rance an3 (hris are !oin! to !o.others across the co$ntry! benefit from the federal 6 ssential Air . which 3oesn6t come within a hun3re3 miles of us. "'asicall the alrea3 sai3 the hi!h spee3 rail woul3 !o alon! 4C mph. sai3 %rance.com/news. +olaski 0a nesville-$t. fun3in! which subsi3iNes small airports such as those at %ort Keonar3 0oo3 which have less than 10. ")t seems to me that the current a3ministration6s focus is on rail.pulaskicount (ount Bail D2. *bama has pushe3 for lar!e amounts of mone to help states buil3 hi!h-spee3 rail links. Aobert (it #ttorne an3 now is the electe3 +ulaski (ount +rosecutor. an3 #irport 2ana!er (hris $chrantN will be atten3in! a conference on the essential air service pro!ram ne>t week in 0ashin!ton.#$D pro!ram 3urin! the %e3eral #viation #3ministration @%##D reauthoriNation this wee %& . Aobert Joint #irport 'oar3 member Qevin &illman took aim at +resi3ent 'arack *bama6s plans for hi!h-spee3 rail service 3urin! the airport boar36s .com/note. %un3s for the trip come from the airport6s marketin! !rant. &illman sai3. Si8 r$ral airports in New Qor%! as well as more than 1-. &illman. &illman sai3. &illman sai3. . private carriers receive contracts with local airports to provi3e passen!er air service which the otherwise mi!ht not be financiall able to 5ustif . &arrill sai3.he onl public transportation we have linkin! us to the rest of the worl3 is air. ".

$aranac Kake an3 Kake +laci3.2C?. 6ssential Air Services f$nding provides critical s$bsidies to s$pport commercial air service to $nderserved r$ral comm$nities across the co$ntry& )n Iew Mork.228. +lattsbur!h.44:. This led to a scarcity of air service in many r$ral comm$nities across the co$ntry where operating costs were higher and pop$lations were smaller and less dense& .his amen3ment not onl cuts off entire communities from air service. Aesearch $chool of $ocial $ciences.C16.466. %iel3 work for the stu3 was con3ucte3 with financial assistance from the . *!3ensbur!.htmD2. an3 the )nternational (enter for )nte!rate3 2ountain +romotin! $mall .948. +lattsbur!h receives 71. This wee% the Senate is debating the ederal Aviation Administration I AAJ 1ea$thori:ation /ill which sets air travel policy for the entire co$ntry& Mester3a .#$.or!/Bepts/escap/pop/5ournal/v10n2a4.here is no Fuestion about it .he . an3 $aranac Kake an3 Kake +laci3 receive 7 1.#$ fun3in! which if passe3 woul3 strike a critical blow to /pstate Iew Mork6s airports an3 irreparabl harm the econom in those re!ions. 2assena.4?C..r$ral comm$nities! inclu3in! seven communities in /pstate Iew Mork.#$ pro!ram for their survival: Jamestown receives 71. &awaii. there woul3 likel be no sche3ule3 air service to Jamestown. http://www. *!3ensbur! receives 71.Service program! and wo$ld be at serio$s ris% witho$t this f$nding& Iot onl 3oes the 6AS program provideRsS air services to un3erserve3 rural communities! b$t it is an economic engine in those regions! contrib$ting to the s$ccess of local b$sinesses and promoting (ob creation and growth& C.ssential #ir $ervice pro!ram was 3evelope3 after the airline in3ustr was 3ere!ulate3 in 1C?8.494. $enator 2c(ain6s proposal woul3 force Iew Morkers in those re!ions to travel lon! 3istances to access air service. 0atertown. $enator 2c(ain propose3 an amen3ment to the %## reauthoriNation eliminatin! . 0atertown receives 71.490. .29?.804. K& Small economies provide the %ey internal lin% into the economy /a(racharya <E+ @'hishna Ian3a 'a5rachar a.ast-0est (enter +opulation +ro!ram.owns for Aural Bevelopment: # Liew from Iepal Bevelopment @)()2*BD. businesses an3 5obs will suffer. is a +ost-3octoral %ellow with the Bivision of Bemo!raph an3 $ociolo! . 2assena receives 71. Bere!ulation !ave airlines the free3om to 3eci3e which markets to serve an3 how much to char!e for that service. but woul3 also eliminate hun3re3s of 5obs an3 harm local businesses that rel on air service for their success. #ustralian Iational /niversit . 0ithout .he . ) will fi!ht this tooth an3 nail to make sure that /pstate Iew Morkers have access to reliable. there are si> rural airports 3epen3ent on the .access to air travel is good for b$sinesses! good for (obs! and good for the financial health of the comm$nity!C $chumer sai3& P. but irresponsibl en3an!ers their economies as a whole. 2ike Bou!lass an3 'rian 2urton.#$ pro!ram was put in to place to !uarantee air service to these un3erserve3 communities & 6AS provides s$bsidies to comm$ter airlines across the co$ntry to serve appro8imately 1K.614.$ . 0ithout reliable airports in these rural communities.un. affor3able air travel. woul3 like to acknowle3!e with !ratitu3e the comments an3 support of Javin Jones.

1CC2D. $econ3l . 1CC1D. 1C82D.The proponents of small town development see an important role for small towns in improving the conditions of the r$ral poor in developing co$ntries& irstl . rather than allowin! them to filter inefficientl 3own the hierarch of urban centres an3 transportation routes causin! time.he rapi3 !rowth of lar!e cities often results in !reater re!ional ineFualities.an3 3istance-3ela effects. )t is believe3 that urban population !rowth an3 a!!lomeration in small towns creates increase3 3eman3 for a!ricultural pro3ucts from nearb rural areas. 1CC2Z Keinbach. the can act as alternate 3estinations for potential mi!rants to lar!e cities @2athur. problems of !overnance an3 environmental sustainabilit . . .$(#+.hir3l . an ar!ument for promotin! small towns is that they provide mar%ets for $rban cons$mer goods from higher>level towns and act as trading centres for agric$lt$ral goods from r$ral areas @Aon3inelli. proponents of small towns consider them appropriate locations for concentrating p$blic services! s$ch as agric$lt$ral development services! health services and ed$cational facilities! for reaching a larger r$ral pop$lace @. E& I'nsert econ impact hereJ . 1CC1Z Jones. 1C81J& )t is assume3 that the provision of a!ricultural cre3it an3 inputs at the small town level can intro3uce farmin! innovations at the lowest level.a lor. small towns are seen as possible locations for providing non>farm employment for the growing r$ral pop$lace in hinterlan3 villa!es @Jaile. all of which call for !reater attention to smaller towns from eFuit consi3erations as well @. 0ith e>pansion of emplo ment in small towns. 1C8:Z Jaile. 1CC2D.

1uite correctly. . )n 2ontana. @f the C%5 would only authori4e sufficient fun3s for lar!er aircraft an3 more freFuent service. Bhis is unconscionable waste. (on!ress provi3e3 for subsi3ies to support "essential air service. is an "investment.he subsi3 . @t is simply utili4ing ta. the decisive criterion for future subsidy is a historical demonstration of previously unviable or inefficient air service operations. in #riNona to 7200. 0hat 5ustification can there be for reFuirin! that ta. sparsel populate3 re!ions will be 3enie3 essential services. Brips should only be made if the benefits outweigh the costs. @n other words.his pro!ram is not !ivin! ai3 to the 3estitute. we coul3 reall 3evelop the sche3ule3 air service s stem. %dvocates of the subsidy point out. an3 in one section of Iebraska over 7600 per passen!er.necessary< or .essential air service< subsidy program is one of the most wasteful perpetrated by the federal government.payers finance some %ri4onanAs vacation to the tune of 3!"" or some /ebraskanAs business trip to the tune of 3-""> Bhere is no 2ustification.he C%5. that re1uiring riders to pay the full cost will reduce the number of trips made.Affirmative !)e Essential Air Service is not &e% to t)e econom% and it is waste'ul s$endin( # Semmens 819 ('ohn Semmens and :ctober ()#( http*++www. some of its proponents have sufficient !all to claim that the real problem is un3ersubsi3iNation.he subsi3 can be substantial. . .thefreemanonline.hese claims are unfoun3e3 an3 the reasonin! is fallacious.payersA money to allow businessmen and tourists to pay less than the full cost of their transportation. (onseFuentl . #ware of the pitiful current operatin! results un3er the "essential air service.. let6s e>amine an e>ample from #riNona. . . pro!ram. it amounts to 7C0 per passen!er. is too niggardly in its subsidy awards. )n or3er to neutraliNe this ar!ument an3 !et airline 3ere!ulation passe3 in 1C?8.he or3inar person Fuite naturall ima!ines that "essential. *n one series of routes in Iew .org+columns+essential-air-service-subsidies-2ust-plane-foolish+$ *ne of the ar!uments that is alwa s offere3 in opposition to 3ere!ulation of transportation is that some remote. )t is not fee3in! starvin! chil3ren.here shoul3 be no misun3erstan3in! of what is bein! subsi3iNe3. is 3etermine3 in a completel arbitrar an3 sill fashion.n!lan3 it amounts to about 7:0 per passen!er.he ma5or accomplishment of this subsi3 pro!ram is to finance un3erutiliNe3 sche3ule3 commercial air service. So what> Bhere is nothing inherently beneficial about air travel. 2ore trips than woul3 be 5ustifie3 b the benefits are taken because the user is not pa in! the full cost. must mean necessar or in3ispensable.his wastes scarce resources an3 re3uces the !eneral welfare of the societ .indispensable< about flying largely empty aircraft around various parts of the country> . . ' wa of illustration. Bhere is no reason why the users of air service should not pay the full cost of that service.he official 3efinition of what is "essential air service. . it is entitled to a subsidy for the provision of scheduled air service until ()##. Kittle thou!ht was !iven to 5ust e>actl what constitutes "essential air service. the . =hat is . )f a point on the map had scheduled air service at some time during the ()-#?# base period. they assert. . . past waste serves as the 2ustification for future waste.< =hat is being subsidi4ed is business and tourist travel. thou!h 3efen3ers of the pro!ram 3o their best to 3isseminate mislea3in! interpretations of the meanin! of "essential air service. . Since most of these points receiving scheduled service between ()-# and ()?# were also receiving subsidies for this service. that will pa off in the lon! run.. .his wei!hin! process is 3istorte3 when part of the cost is covere3 throu!h an involuntar pa ment b a thir3 part Gnamel the ta>pa er. these people assure us.

< @nvestments that will pay off in the long run will be undertaken by private capital.pression of the firmAs belief that there will not be a long-run payoff on their investment. Bhere is no need for subsidy.he "essential air service.his e>pen3iture has involved a coercive e. .hus. -""$. /n3isclose3 in this simplistic comparison is the fact that in 1C68 the loa3 factor was onl 81. . the fe3eral !overnment has spent nearl 7C0 million in subsi3ies for sche3ule3 air service. #3vocates of a lar!er subsi3 ar!ue that the small plane discourages many would-be passengers. @n ()-#. %irms have been known to sustain several ears of losses in or3er to buil3 a market.his is the eFuivalent of three passen!ers boar3in! the :0-seat aircraft emplo e3. subsi3 can onl interfere with the market6s abilit to ascertain an3 meet societ 6s !enuine nee3s. /o sane person could seriously propose to add C" seats in order to fill one.his e>ample woul3 appear a rather convincin! 3emonstration of the inelasticit of 3eman3 for air service. and claim that this is a wise . . Bo buttress their case they point out that enplanements at &rescott in ()-# were ten times greater than the most recent year (-""" vs. .he market place is well-suite3 to the task of selectin! an3 fun3in! investments that will increase consumer choice an3 welfare. in 1C68 three of :0 seats were fille3 vs.Aecent subsi3iNe3 service to +rescott has been performe3 with an ei!ht-passen!er (essna :02 at a loa3 factor of about 201. the lack of willingness of a private business firm to engage in providing a service unless subsidi4ed is a convincing e.investment. and am$le /usti'ication 'or t)e elimination.essential air service< $ro(ram. :on(ress would do well to dis$ense wit) t)e . less than two passen!ers per fli!ht are enplane3 or 3eplane3 at +rescott. . two of ei!ht in 1C?C. . @n fact. . a larger aircraft and more fre1uent arrivals and departures produced more passenger trips.hat is. . )n the past ear.propriation of funds from the general public in order to finance inefficient and wasteful air service. +rivate firms are a3eFuatel familiar with start-up costs for new pro3ucts an3 services. Bhe nation is ill-served by this policy. o' t)is subsid% $ro(ram. !)ere is no reason 'or t)e retention.